Friday, September 12, 2008

I had the opportunity a couple of weeks ago to sit down with Real Salt Lake GM Garth Lagerway. The original interview was scheduled to discuss the player acquisition process, but we also were able to discuss the Will Johnson acquisition which was in the process of being finalized as we met. Here are some interesting thoughts that Garth shared with me.

Garth explained that in general, the chips that you have at your disposal for player acquisition are: draft picks, allocation money, players, and allocation rankings (not to be confused with allocation money despite being similarly named).

He explained that RSL is now low in the allocation ranking, very low in allocation dollars and we do not have a lot of draft picks. Not surprisingly Toronto, New York and Chivas have a lot of allocation money as a result of selling Maurice Edu, Jozy Altidore, and Brad Guzan respectively. When MLS teams sell players abroad they get a certain set amount of allocation dollars that in theory can be used to help them replace the player. We’ll see later how allocation dollars can be a benefit in a salary cap environment.

With RSL’s current position the team has “maxed out” what they can do with draft picks and allocations. “Future deals are going to be either with players or to bring in draft picks or allocation dollars.” After the season the allocation rankings will re-set based on order of finish this season. In addition, last year the league gave extra allocation money to ALL teams for the first time. This was in addition to the annual “you suck allocations” traditionally given to all of the teams that do not make the playoffs.

When asked to explain the team’s acquisition approach Garth explained, “Every club is different. Ours has evolved. Initially we felt we had to strip everything down and start over. We were literally looking just for good players at just about any position other than Beckerman, Morales and Rimando.”

Now that many of these foundation pieces have been put into place, this has allowed this approach to evolve. During the most recent transfer window a primary focus was to just add depth to the team. The additions of Clint Mathis, Robbie Russell, and Will Johnson added players with experience to the roster, and added depth at the forward spot, and in the midfield and defense. Going forward, RSL may be able to target a specific type of player such as a left-footed midfielder or an attacking player that fits a specific style of play.

The cases of Clint Mathis, Robbie Russell and Will Johnson highlight one of the strategies that the team is employing: that is to bring in American players who are interested in returning to the US to play in the MLS.

As Garth has said, “We hope to be in a position at the end of the year to have a group of half a dozen guys that are our core guys, and then we can look for players to complement them. If you look at Houston or New England those are teams that have been together for 4 or 5 years, and that’s the direction we want to go, and build year after year.”

Bringing returning American’s fits nicely with this philosophy. They tend to be lower priced than other international players of similar skill. In many cases, they will come with either a minimal transfer fee, or none at all. They also do not take up an international spot. The players tend to be very interested in being in the US, and work hard to make sure that they remain on the pitch. In many cases the European experiences that they have had are hard to replicate here in the US.

With this in mind, I have tried to include discussion about the acquisition process below largely in Garth’s own words:

How do you contact these playersI was very curious as to how the initial contact with players comes about. It turns out that it’s really a wide variety of means and methods:

“Robin Fraser, Jeff Cassar, Jason Kreis, Brian Johnson – we definitely tap their contacts.” This is how the Nat Borcher’s deal came about.

Garth reaches out to individual agents and agencies that have contacts around the world. He’s almost like an air traffic controller. It’s important to get DVD’s of 90-minute matches, not just highlight clips. It’s also important to develop relationships.

In the cases of Ian Joy and Kenny Deuchar, the players initiated contact with the team through emails.

In general, here is the process that the team tries to go through:

First step – develop contacts through relationships, searches, etc.

Second step – preview player on a DVD

Third level – see the player live

Seeing the players live has its own set of challenges. We either fly into the country or bring players on trial. One of challenges of trials here in Utah is the altitude and the heat in the summer. Guys tend to struggle for the first week even if they have good technical ability. So our trials need to be two weeks, which limits your pool of players. So we probably will need to continue to travel abroad to see players.

Is there an area of the world that you have the most traction? “That really comes down to relationships. We like to think that we have good relationships with the biggest agencies in Germany, the UK, and a particular agent in Argentina. We deal with a number of other individuals and agencies, but those are the cornerstones. I’d like to build our contacts in Brazil, because I see that as an area with potential.”

In S. America, player ownership is a grey area. In US, and Europe teams own the player. In S. America the players ownership may be hard to decipher. In Brazil – the leagues are less clear. You need to spend a lot of time on the ground to get something done in Brazil. Even FC Dallas who has connections in Brazil were unable to get a player from there, which probably is mostly a reflection of the complexities involved. We can’t travel freely to Brazil without a visa. Players need a visa to come here even for a trial.

Signing players with the leagueOnce a player is identified, has been through a trial, and we want to sign them the real tricky part begins. The MLS, as a league that has been around only about 12 years, is still relatively young and small in size. The money available to spend on players is dwarfed by other professional sports in this country. More importantly, the dollars spent on top players in this country is a fraction of what is spent in other countries. This makes it difficult for the league to compete for players with teams in other countries.

With the single entity system (all contracts are with the MLS as the single employer of players in the league) you have to involve the league at every step along the way. The league is very supportive. “Transfers from S. America are typically done with people not with clubs, because that’s who owns the rights. Because of this they are often done on loan. One of the issues that the league is going to address is that you can find and acquire good players particularly in Argentina, but often that is done on loan.”

On buyout clausesMost of the acquisitions from South America come through a loan arrangement,

“Any player from S. America, it is unusual if they are not on loan”.

This eventually leads for challenging decisions by the team if they want to keep the player beyond the loan arrangement.

“As you can imagine in a world governed by a hard salary cap if the buyout clause is half a million bucks, sure you might have the allocation money but all of that allocation cost counts against the cap and so you have to account for that. As you probably know the designated player counts for $415,000 against the cap, and you are only allowed one designated player per team. So now if you have a $500,000 acquisition cost, before you pay the player a dollar you are already into DP territory. So now you have to structure not only your cap, but the DP slot and any potential fee with the player.”

On Olave, Morales and EspindolaObviously three of RSL’s more important players are from South America, with loan buyout decisions fast approaching (it wasn’t completely clear but I am 99% sure that a decision on Morales and Olave come at the end of the year – possibly also for Espindola).

Is that going to be a significant issue (loan buyouts)? “For sure. For sure. The two players for us that we most want to resign are Morales and Olave. I think they have been outstanding. I think Fabian Espindola has done well for us too but because of his injury he hasn’t been in there week in and week out like those two have. But all of those guys come with buyout prices attached that are very, very high.”

This again fits into the strategy of making your core players American’s, who will have more with the league. It’s very possible that many of the foreign players will fit the profile of hired guns because we may not be able to afford (under the salary cap) to either pay an outright transfer fee or a loan buyout. This is an issue that the entire league will continue to face as quality players make their way to the league.

On economics of the leagueGarth gave some thoughts on this aspect and the economics of the league:

Salary cap and acquisition costs: “the economics of the league are what they are. You have to have revenues to support acquision costs.”

“The league has very intelligently focused on slow growth.”

“As you add these stadiums, you have the ability to generate revenue that is not available when you rent a big football stadium from somebody else.”

The more I hear about these issues, the greater understanding that I have of the importance of the stadium to the team’s financial future. This was highlighted recently by an article in Forbes magazine which discusses RSL’s expectation of making a transition to profitability along with the new stadium: Most Valuable Teams.

On players coming back or to the league for the first timeGarth discussed some of the ways that we had initial contact with players, and some of the MLS rules about returning players which in many cases have their rights still owned by their original team (unless they received compensation for these players when they first left the league).

“It works all different ways, man. With Ian Joy he had sent us an email. He had heard an interview with me when I had taken the job, and said that sounds like a guy I want to play for."

“We had an immediate rapport”.

“Kenny Deuchar was a similar thing”.

“With Will he had turned down their offer so Chicago retained his rights. As opposed to the Nat Borchers situation, where Colorado had sold him to Odd Grenlund. Therefore they did not retain his rights.”

On international spotsGarth discusses the international spots and how they apply to RSL’s situation. Under an older system we had permanently traded two youth international spots for RSL stalwart players Adolfo Gregorio and Jeff Stewart. Currently teams in the MLS would normally have 8 international spots, RSL has 6 with an additional temporary spot through 2009 which was part of the trade with Kansas City to acquire Yura Movsisyan.

“An argument can be made that it’s a bit unfair that we don’t have those spots which were originally youth international slots, and are now in essence full international slots.”

“To be honest our experience is that when adding an international player, you want that to be a premium player. So if you have 6 spots, it’s difficult to imagine being able to sign that many international players and staying within the cap.”

So lacking 2 international spots doesn’t really hamper us at this point. “I think that if you get into a situation where you have 6 international players and want to sign a player but don’t have a slot then you go to the league and have a conversation about what the options are. I see this as one of those that we’ll quickly evolve out of.”

Latest transfer windowGarth gave some insight into some of the action that took place behind the scenes during the most recent transfer window. I get the sense that these were just a couple of many players that were pursued, but these were two that we were perhaps most interested in.

“We were looking at an Argentine forward that we got outbid for. In a salary cap world that’s just the way it works. It was a player that’s an excellent player. He scored a ton of goals, but we couldn’t afford him at the end of the day. We had cap space, a roster spot, an international spot. We were in as perfect a position as we could possibly have been to get him, and he went for a ton more money to an Argentine first division club.”

“With Pat Noonan, we didn’t have an ’09 pick that we were willing to deal. We didn’t have a spot in the allocation order, and we were low on allocation money. So the way all of those forces lined up we had interest in Pat, but we weren’t as strongly positioned as Columbus was.”

I hope this helps everyone (it did for me) get a sense of the acquisition process and all of the complexities involved.